The real estate sector in Colombia is poised to recover well as foreign investors from the US and Europe return to the market in 2010, it is claimed.

Indeed, the property industry in this Central American country has seen it all before. It suffered its own mini real estate market collapse in the late 1990s. At the time, the most common type of financing was adjustable rate mortgages which were tied to skyrocketing inflation rates and as the value of the Colombian peso declined and the cost of living increased, so, too, did mortgage payments leaving many homeowners with properties worth less than their loans and foreclosures became rampant.

In 2001 political stability, a growing economy and the introduction of fixed-rate mortgages helped the real estate market recover and prices increased steadily. According to Juanita Reyes, corporate accounts manager at Colliers International Colombia, average residential property prices rose 25% percent during the past decade, with high-end properties in popular coastal locations seeing values go up 40 to 50%.

The number of real estate transactions rose sharply too and the second home market increased as tourism increased especially in popular destinations like Villa de Leyva and Cartagena, on the Caribbean coast.

Since the global economic crisis, real estate prices nationwide have flattened and inventory is back on the rise but Columbia has not seen the kind of crash experienced in the US. Colombia's economy is projected to grow this year, albeit at a slower pace than previous years.

The main cause of the slowdown has been the recession in the US and Europe. About half of Colombia's foreign property investors come from North America with another 30% from Europe.

'Once these foreign buyers start returning then the market is likely to see a mini boom. As economies around the world start to improve we expect to see a surge in interest in 2010,' predicted Alunja Marques, an analyst with Diaz Investment. There are also moves to make it easier for foreign investors to buy. At present there are no restrictions on foreign buyers in Colombia's interior but director ownership by non-citizens is forbidden along the coast and on the islands with foreigners having to create a Columbian trust or corportion in order to invest.